Hawaii: Shipping firms to raise fuel surcharges--fourth raise in last year

By Glenn Scott Advertiser Staff Writer

The two major shipping companies serving Hawaii will raise their fuel surcharges again next month to 4.25 percent, bumping up costs for the fourth time in a year.

Officials for both companies pointed to rising oil prices for forcing the latest increases, which will go into effect Oct. 15. The increases mean higher prices for freight forwarders and other businesses shipping to or from Hawaii and more pressure on retailers to choose whether to absorb the costs or risk passing them along to customers.

Matson Navigation Co. said yesterday that it had filed with the Surface Transportation Board to increase its surcharge 1 percentage point from 3.25 percent.

Competitor CSX Lines, formerly known as Sea-Land Services, had filed Monday to raise its surcharge even higher, from 3.25 percent to 4.75 percent. But the company will reduce its proposal, said Brian Taylor, CSX Lines vice president and general manager.

"We would obviously match the 4.25 percent to ensure we are competitive with Matson," he said.

Bal Dreyfus, Matson vice president and area manager for Hawaii and Guam, said the latest surcharge comes as the cost of bunker fuel continues to rise. If prices eventually subside, he said, Matson would reduce its surcharge.

"We watch the market," Dreyfus said. "As the prices change, we resist raising them, but sometimes they reach a point when we have to."

Matson first imposed a 1.75 percent surcharge last October. It then raised it to 2.25 percent in February and 3.25 in April. In each case, Matson and CSX Lines have adopted similar rates.

The increases reflect the rocketing prices of crude oil, which yesterday reached their highest level since the Persian Gulf War. A barrel of crude oil closed at $35.92 on the New York Mercantile Exchange futures market, up $1.85 from Thursdays close.

The Dallas Morning News reported that yesterdays price marked the highest point since oil closed at $36.80 on Oct. 18, 1990, 2 1/2 months after Iraq invaded neighboring Kuwait.

At the University of Hawaii, Manoa, a professor in the College of Business Administration said yesterday that the higher worldwide fuel prices are putting both shipping companies and their business customers in a bind.

David Bess, a management professor, said retailers must weigh the consequences of passing along the cost of rising surcharges to customers. The danger: Higher costs can translate into fewer sales, which in turn can lessen demand for shipped goods.

"In that context," Bess said, "its not to anyones advantage to raise prices."

Taylor agreed, saying rising fuel costs are the major concern for his and every other transportation company. "Its by far the single largest over-budget cost item we have," he said.

Bess said consumers should realize that shipping surcharges dont necessarily translate into similar hikes in retail products. "In terms of a box of cereal," he said, "the transportation cost is a very small percentage of the overall price."

He also noted that the consumer impact of a fuel surcharge on an airline ticket price is far greater because the cost is passed directly to the buyer.

At Eki Cyclery in Honolulu, owner Jayne Kim said her store receives deliveries by ship from the Mainland, but cost increases have been less than 1 percent in the past year. She said the surcharges have had little effect on business so far.

And the rising oil prices, she conceded, may indirectly bring in business as motorists look for cheaper ways to commute.

"If we use less energy," she said, "maybe the prices will come down."

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-- Carl Jenkins (Somewherepress@aol.com), September 16, 2000